There appear to be no anomalies in the aftermarket of a sample of 4,848 US IPOs over the period 1... more There appear to be no anomalies in the aftermarket of a sample of 4,848 US IPOs over the period 1975 to 1995, except issues offered below $6. Risk is priced in the aftermarket in accordance with Rubin-stein's asset-pricing model. Unlike under the efficient markets ...
When continuous-time portfolio weights are applied to a discrete-time hedging problem, errors are... more When continuous-time portfolio weights are applied to a discrete-time hedging problem, errors are likely to occur. This paper evaluates the overall importance of the discretization-induced tracking error. It does so by comparing the performance of Black-Scholes hedge ratios against those obtained from a novel estimation procedure, namely local parametric estimation. In the latter, the weights of the duplicating portfolio are
Proceedings of the National Academy of Sciences of the United States of America, Jan 6, 2008
Competing successfully against an intelligent adversary requires the ability to mentalize an oppo... more Competing successfully against an intelligent adversary requires the ability to mentalize an opponent's state of mind to anticipate his/her future behavior. Although much is known about what brain regions are activated during mentalizing, the question of how this function is implemented has received little attention to date. Here we formulated a computational model describing the capacity to mentalize in games. We scanned human subjects with functional MRI while they participated in a simple two-player strategy game and correlated our model against the functional MRI data. Different model components captured activity in distinct parts of the mentalizing network. While medial prefrontal cortex tracked an individual's expectations given the degree of model-predicted influence, posterior superior temporal sulcus was found to correspond to an influence update signal, capturing the difference between expected and actual influence exerted. These results suggest dissociable contrib...
Local Polynomial Estimation (LPE) is implemented on a dataset of high-frequency foreign exchange(... more Local Polynomial Estimation (LPE) is implemented on a dataset of high-frequency foreign exchange(FX) quotes. This nonparametric technique is meant to provide a flexible background against whichto evaluate parametric time series models. Assuming a conditionally heteroscedastic nonlinear autoregressive(CHARN) model, estimates of the mean and volatility functions are reported. Themean function displays pronounced reversion. Surprisingly, the volatility function exhibits asymmetry.The CHARN...
Consensus building in a group is a hallmark of animal societies, yet little is known about its un... more Consensus building in a group is a hallmark of animal societies, yet little is known about its underlying computational and neural mechanisms. Here, we applied a computational framework to behavioral and fMRI data from human participants performing a consensus decision-making task with up to five other participants. We found that participants reached consensus decisions through integrating their own preferences with information about the majority group members' prior choices, as well as inferences about how much each option was stuck to by the other people. These distinct decision variables were separately encoded in distinct brain areas-the ventromedial prefrontal cortex, posterior superior temporal sulcus/temporoparietal junction, and intraparietal sulcus-and were integrated in the dorsal anterior cingulate cortex. Our findings provide support for a theoretical account in which collective decisions are made through integrating multiple types of inference about oneself, others,...
The Journal of neuroscience : the official journal of the Society for Neuroscience, Jan 18, 2015
Economic choices are largely determined by two principal elements, reward value (utility) and pro... more Economic choices are largely determined by two principal elements, reward value (utility) and probability. Although nonlinear utility functions have been acknowledged for centuries, nonlinear probability weighting (probability distortion) was only recently recognized as a ubiquitous aspect of real-world choice behavior. Even when outcome probabilities are known and acknowledged, human decision makers often overweight low probability outcomes and underweight high probability outcomes. Whereas recent studies measured utility functions and their corresponding neural correlates in monkeys, it is not known whether monkeys distort probability in a manner similar to humans. Therefore, we investigated economic choices in macaque monkeys for evidence of probability distortion. We trained two monkeys to predict reward from probabilistic gambles with constant outcome values (0.5 ml or nothing). The probability of winning was conveyed using explicit visual cues (sector stimuli). Choices between...
The capacity for strategic thinking about the payoff-relevant actions of conspecifics is not well... more The capacity for strategic thinking about the payoff-relevant actions of conspecifics is not well understood across species. We use game theory to make predictions about choices and temporal dynamics in three abstract competitive situations with chimpanzee participants. Frequencies of chimpanzee choices are extremely close to equilibrium (accurate-guessing) predictions, and shift as payoffs change, just as equilibrium theory predicts. The chimpanzee choices are also closer to the equilibrium prediction, and more responsive to past history and payoff changes, than two samples of human choices from experiments in which humans were also initially uninformed about opponent payoffs and could not communicate verbally. The results are consistent with a tentative interpretation of game theory as explaining evolved behavior, with the additional hypothesis that chimpanzees may retain or practice a specialized capacity to adjust strategy choice during competition to perform at least as well as...
There appear to be no anomalies in the aftermarket of a sample of 4,848 US IPOs over the period 1... more There appear to be no anomalies in the aftermarket of a sample of 4,848 US IPOs over the period 1975 to 1995, except issues offered below $6. Risk is priced in the aftermarket in accordance with Rubin-stein's asset-pricing model. Unlike under the efficient markets ...
When continuous-time portfolio weights are applied to a discrete-time hedging problem, errors are... more When continuous-time portfolio weights are applied to a discrete-time hedging problem, errors are likely to occur. This paper evaluates the overall importance of the discretization-induced tracking error. It does so by comparing the performance of Black-Scholes hedge ratios against those obtained from a novel estimation procedure, namely local parametric estimation. In the latter, the weights of the duplicating portfolio are
Proceedings of the National Academy of Sciences of the United States of America, Jan 6, 2008
Competing successfully against an intelligent adversary requires the ability to mentalize an oppo... more Competing successfully against an intelligent adversary requires the ability to mentalize an opponent's state of mind to anticipate his/her future behavior. Although much is known about what brain regions are activated during mentalizing, the question of how this function is implemented has received little attention to date. Here we formulated a computational model describing the capacity to mentalize in games. We scanned human subjects with functional MRI while they participated in a simple two-player strategy game and correlated our model against the functional MRI data. Different model components captured activity in distinct parts of the mentalizing network. While medial prefrontal cortex tracked an individual's expectations given the degree of model-predicted influence, posterior superior temporal sulcus was found to correspond to an influence update signal, capturing the difference between expected and actual influence exerted. These results suggest dissociable contrib...
Local Polynomial Estimation (LPE) is implemented on a dataset of high-frequency foreign exchange(... more Local Polynomial Estimation (LPE) is implemented on a dataset of high-frequency foreign exchange(FX) quotes. This nonparametric technique is meant to provide a flexible background against whichto evaluate parametric time series models. Assuming a conditionally heteroscedastic nonlinear autoregressive(CHARN) model, estimates of the mean and volatility functions are reported. Themean function displays pronounced reversion. Surprisingly, the volatility function exhibits asymmetry.The CHARN...
Consensus building in a group is a hallmark of animal societies, yet little is known about its un... more Consensus building in a group is a hallmark of animal societies, yet little is known about its underlying computational and neural mechanisms. Here, we applied a computational framework to behavioral and fMRI data from human participants performing a consensus decision-making task with up to five other participants. We found that participants reached consensus decisions through integrating their own preferences with information about the majority group members' prior choices, as well as inferences about how much each option was stuck to by the other people. These distinct decision variables were separately encoded in distinct brain areas-the ventromedial prefrontal cortex, posterior superior temporal sulcus/temporoparietal junction, and intraparietal sulcus-and were integrated in the dorsal anterior cingulate cortex. Our findings provide support for a theoretical account in which collective decisions are made through integrating multiple types of inference about oneself, others,...
The Journal of neuroscience : the official journal of the Society for Neuroscience, Jan 18, 2015
Economic choices are largely determined by two principal elements, reward value (utility) and pro... more Economic choices are largely determined by two principal elements, reward value (utility) and probability. Although nonlinear utility functions have been acknowledged for centuries, nonlinear probability weighting (probability distortion) was only recently recognized as a ubiquitous aspect of real-world choice behavior. Even when outcome probabilities are known and acknowledged, human decision makers often overweight low probability outcomes and underweight high probability outcomes. Whereas recent studies measured utility functions and their corresponding neural correlates in monkeys, it is not known whether monkeys distort probability in a manner similar to humans. Therefore, we investigated economic choices in macaque monkeys for evidence of probability distortion. We trained two monkeys to predict reward from probabilistic gambles with constant outcome values (0.5 ml or nothing). The probability of winning was conveyed using explicit visual cues (sector stimuli). Choices between...
The capacity for strategic thinking about the payoff-relevant actions of conspecifics is not well... more The capacity for strategic thinking about the payoff-relevant actions of conspecifics is not well understood across species. We use game theory to make predictions about choices and temporal dynamics in three abstract competitive situations with chimpanzee participants. Frequencies of chimpanzee choices are extremely close to equilibrium (accurate-guessing) predictions, and shift as payoffs change, just as equilibrium theory predicts. The chimpanzee choices are also closer to the equilibrium prediction, and more responsive to past history and payoff changes, than two samples of human choices from experiments in which humans were also initially uninformed about opponent payoffs and could not communicate verbally. The results are consistent with a tentative interpretation of game theory as explaining evolved behavior, with the additional hypothesis that chimpanzees may retain or practice a specialized capacity to adjust strategy choice during competition to perform at least as well as...
Uploads
Papers by Peter Bossaerts